Small Businesses Get Up to $10,000 Tax Credit for Hiring Apprentices and Workers Under 21, Starting 2026

The Apprenticeships for Small Businesses Act of 2025 is trying to make it cheaper for small employers to train the next generation of workers. It introduces a brand-new tax break called the Career and Technical Education Credit, which is essentially a subsidy for small businesses that invest in entry-level talent and vocational training. This isn’t pocket change either; the goal is to make it financially easier to bring on young people who need on-the-job experience.

The Math: Half Off Wages and Insurance

Starting in tax years beginning after December 31, 2025, small businesses can claim a credit based on two major expenses for certain employees. First, you get credit for 50 percent of the qualified wages paid to these employees. Second, the bill also lets you count the cost of workers’ compensation insurance premiums covering those specific employees. The IRS will treat all related businesses as a single entity when calculating the limit, which is a hard cap of $10,000 per year total for the credit. Think of it as the government offering to split the bill on training costs, up to ten grand.

Who Counts as a Qualified Trainee?

The credit isn't for just any new hire—it’s very specific about who qualifies, aiming at the younger workforce and those in formal training programs. To count toward the credit, the employee must either be under 21 years old by the end of the tax year, or they must be enrolled in one of three approved training paths. These paths include a registered apprenticeship program, a community college course related to the business's trade that leads to an associate's degree, or any other career training or vocational program related to the employer's business. This last point—the inclusion of “any other” program—is notable because it gives employers a lot of flexibility, which could be great for innovation but also makes the rules a little squishy around the edges.

The Real-World Impact: Lowering the Cost of Entry

For a small plumbing company, for example, bringing on a high school graduate who is simultaneously enrolled in a local technical college program suddenly becomes significantly cheaper. If that business pays $20,000 in wages and $1,000 in workers’ comp premiums to that young trainee, they could claim a credit of over $10,000 (50% of the wages plus the insurance cost), assuming they haven't hit the cap yet. This directly addresses one of the biggest hurdles for small businesses: the high cost and risk associated with training inexperienced workers. By lowering that financial barrier, this bill incentivizes small employers to participate in the workforce development pipeline, which is a critical need across many trades and technical fields.

However, businesses that don't operate in a trade or technical field, or those that don't typically hire workers under 21, won't see any benefit from this credit. Also, because the credit is capped at $10,000, it’s clearly designed to help small operations rather than large enterprises that might spend millions on training annually. The biggest challenge in implementation will likely be defining and verifying what counts as a legitimate "other career training or vocational program"—the IRS will need to issue clear guidance so businesses know exactly what paperwork they need to keep to justify that 50% credit.